The Digital Dividend

Political, intellectual and business leaders are engaged today in a vigorous and far-ranging debate over what should be done to address the “digital divide”-the fact that various geographic, socioeconomic and cultural subpopulations have widely varying access to a range of digital technologies, including computers, the Internet, mobile phones and, increasingly, TV. These conversations encompass multiple perspectives and options-everything from giving schools, community organizations and citizens of lesser-developed countries broader access to computers and the Internet to simply letting market forces run their course. And they are truly global, whether in various meetings of the United Nations or as a prominent agenda item at the annual G8 summit of the world’s leading industrial countries. Yet strikingly, they lack a single organizing principle.

The Luddites, for example, argue that no digital divide exists because technology doesn’t really organize anything. The Technologists believe that with a few government policy tweaks, hardware and software dispersion through the marketplace will address any gaps. The Market Adherents say that market forces will eliminate the divide without any government involvement. Meanwhile, the Digital Egalitarians want to mandate equal access to technological tools throughout all strata of society, the Digital Democrats seek a political order that enables all people to participate as e-citizens in a cyberdemocracy, and the Globalists view the divide as proof that the United States is digitally isolating itself from the rest of the global economy. In short, there are many perspectives, but no encompassing view.

None of these characterizations captures the full extent of the digital divide, which in fact comprises many fissures rather than a single fault line. Yet the most significant divide today-one that will bear upon the way all the others play out-may be that between policymakers and the business community.

The digital divide is not only about offering Internet access to every citizen, nor is it only about social policy or computer penetration. The stakes are in fact much greater. Creating what I call the “digital dividend” will enable businesses to thrive at a new level of postindustrial innovation. The digital dividend is the set of outcomes that the private sector can achieve by promoting widespread penetration and use of digital technologies. Within companies, this can translate into better-trained, more productive employees; outside, it can lead to expanded sales and marketing opportunities at home and abroad, as well as a more diverse supply chain.

Government has taken the first steps in identifying and addressing aspects of the digital divide. Yet government cannot and should not be expected to lead on this issue. Instead, the business community must take on that role.

Government initiatives are insufficient for several reasons. First, many innovations are fundamentally driven by the marketplace-and government can’t dictate the market. Second, with budget surpluses turning into deficits, policymakers today have fewer re-sources with which to close the fissures.

Given these factors, and more importantly, because of the tremendous stakes for the private sector, business leaders must engage with the policy community to develop strategies for spreading digital technologies.

Businesses today are uniquely poised to realize the benefits of this effort. Today’s technologists are pursuing a “digital manifest destiny” featuring robust networks connected by wires, cables and the ether. Satellite and wireless communications, content digitization, broadband network access via cable or telephone lines, and many other technologies are inexorably converging. The result of such connectivity is a web of networks, each of which becomes exponentially more powerful as it grows. The business community must make this happen better, faster and in ways that help business.

For example, within corporations, managers must make sure lower-skilled workers get the training they need to participate in new forms of work. The digital-proficiency gap between high- and low-skilled employees must be closed. Mobile and work-at-home personnel also need an adequate technological infrastructure to link them to company systems, customers and coworkers.

Beyond the office walls, the private sector must also help to prepare tomorrow’s work force. U.S. workers will slip further behind their competitors abroad unless the educational system gets corporate help to prepare students to work in the digital economy.

The emergence of the electronic marketplace as the hub of domestic and global commerce creates another compelling argument for business to help close the digital divide. As trade occurs today on an increasingly global stage, there are numerous opportunities to develop relationships with suppliers in Bombay as well as in Boston. Additionally, the spread of digital technologies offers an opportunity to meet new consumer demand and to create more sophisticated customers for products and services.

In order to realize the digital dividend, the business community must form a new compact with the policy world. Policymakers have long promoted the concept of “universal service” to ensure that income and geography are not insurmountable barriers to telecommunications access. The business community recognizes the economic efficiency of having as many people connected as possible, but it looks to the bottom line rather than social policy as the rationale for supporting network expansion. Joining these two principles can generate exponential growth in digital-technology penetration by virtue of both government support and private investment.

Let’s focus on these two principles in further detail. In the United States, universal service-the idea of extending the telephone network to all-was the brainchild of Theodore Vail, chairman of AT&T from 1907 to 1919. Vail believed a private-/public-sector compact was the most effective mechanism for realizing his ambitious goal, and he prevailed upon the government to grant AT&T a regulated monopoly in exchange for building out the telephone network. Vail’s idea was to make a ubiquitous telephone network into a source of both private profit and public good.

The insights of Ethernet inventor [and TR board member-ed.] Bob Metcalfe are equally compelling. “Metcalfe’s Law” states that the value of a network increases exponentially as it grows. Such a law applies geometrically to the digital dividend, which encompasses not one network but many. But in order to achieve the promise of Metcalfe’s Law, it will not be enough to stand by as government develops targeted subsidy programs and technology drives prices down to more affordable levels-processes that will require considerable time.

Combining Vail’s wisdom with Metcalfe’s insight offers a better base for promoting government support and private investment simultaneously. And it can be done without creating any monopolies. For example, if businesses agreed to underwrite access to digital networks and devices for far larger populations, government could provide appropriate tax incentives in support. This emphasis on a digital dividend can generate obvious payoffs for both the private and public sectors.

At the 2001 G8 summit in Genoa, Italy, President George W. Bush and other heads of state approved an action plan for seeking private-sector involvement in improving connectivity, lowering costs, establishing national Internet strategies, deploying information technology in health care and development aid, and fostering entrepreneurship. But if this plan is to be realized, policymakers in each nation will have to consult closely with the multinational business community, which is starting to realize how the spread of digital technologies can expand its markets. One vital first step is to ensure that there is a pro-competitive regulatory framework in place so that business can calibrate strategies for investing and achieving profits.

Between now and the June 2002 G8 summit in Canada, the leaders who met in Genoa must bring together social-policy and business policy interests to address this critical issue. Linking the digital divide and the digital dividend is something that Luddites, technologists, egalitarians, globalists and free-market adherents need to agree upon if we are to achieve real-world results both in the United States and abroad.